Grant Prideco Inc., Houston, has signed a definitive agreement to acquire Schlumberger Ltd.'s Houston-based drillbit maker Reed-Hycalog for $255 million in cash, 9.7 million shares of Grant Prideco common stock (valued at $90 million), and the assumption of about $5 million in debt.
The transaction is expected to close by yearend, pending certain regulatory approvals, Grant Prideco said.
In another recent company acquisition, Denver independent Patina Oil & Gas Corp. said it will acquire privately held Oklahoma City-based oil company Le Norman Energy Corp. in a $68 million deal. The acquisition will boost Patina's oil production by about 25% and its total production by more than 10%, the company said.
Grant Prideco acquisition
For the 12 months ended June 30, Reed-Hycalog had revenues of $228 million and earnings of $52 million, before interest, taxes, depreciation, and amortization (EBITDA), the company said. For the same time period, Grant Prideco had revenues of $711 million and EBITDA of $140 million.
Grant Prideco called the acquisition "an excellent strategic and industrial fit" for the company's worldwide drillstem technology. "Long term," said Grant Prideco Pres. and CEO Michael McShane, "we expect to grow Reed-Hycalog's business and to realize synergies in technology, manufacturing, and sales."
In addition to its own stock, Grant Prideco financed this transaction through a new credit facility of about $265 million.
"The strategic rationale for the acquisition is product line extension, not industry consolidation," noted Lehman Bros. Inc. analyst James Crandell. Crandell went on to say that the benefits of the deal included:
•The complementary nature of Reed-Hycalog's drillbits and Grant Prideco's drillstem technology.
•The earnings accretion.
•The expected technology, manufacturing, and sales synergies.
"Reed-Hycalog will remain a stand-alone operation in order to reestablish its project line focus and thereby its profitability," Crandell concluded.
Patina to buy Le Norman
Most of Le Norman's properties are in Oklahoma's Anadarko and Ardmore-Marietta basins.
The company holds 88.90 bcfe of proved reserves, split as 12.1 million bbl of oil and 16.4 bcf of gas. Less than half of these properties' reserves are on production, Patina said.
Patina said it would finance the acquisition through an existing bank facility and through the issuance of 200,000 common shares.
David D. Le Norman, Le Norman president and founder, will join the acquiring company as senior vice-president, business development.
"This acquisition establishes a sizeable asset base for Patina in Oklahoma and adds to the Midcontinent operations acquired in the Elysium purchase 2 years ago," said Thomas J. Edelman, Patina chairman.
Patina operates primarily in Colorado's Wattenberg field.
The acquisition also will add to Patina's asset portfolio a number of infill drilling, secondary recovery, and behind-pipe recompletions in a geographically concentrated area, Edelman said.
"While the (acquired) properties are primarily shallow oil fields, they provide significant opportunities for us to apply our expertise in large-scale, low cost operations and drilling developed in Wattenberg," he said.
The transaction is expected to close early this month.
